CSX Corp (CSX) 2001 Q1 法說會逐字稿

Well, good morning everybody, we are delighted to have you join us for this first quarter report for the first quarter of 2001 and by now I hope you have had a chance to look at the release that went out an hour or so ago and tells the story of continuing improvements at the railroad and pick up in operating income at the railroad in the face of observing weaker coal loads with revenues holding relatively flat which requires means we are getting more revenue per car which is something I told you we are going to try and do. So, it is overall a pretty good story particularly in the face of what is without any doubt a much weaker environment than we saw in the first quarter of the year 2000. So, we are pleased with the progress we are making. It is not where we need to be, it is not where we are going to be, it is not where we intend to be, but at least it is indicative of the fact that we are fairly running the railroad better. Customers are recognizing that, we are bringing some traffic back to the rail, which has been on the highways, and the costs are coming out. And that is probably the big message. We have had some strength in one particular area of coal and the details on the cost story and the truck conversion story and the new product story and the service story and the overall performance story will be told by Michael J. Ward and William J. Flynn. To go over with the numbers let me call on Paul R Goodwin.

Thank you, John W. Snow and good morning. Before I do get into the numbers and touch on some of the highlights, I do by way of housekeeping just want to go over a few of the points made in this cautionary comment, we will all use such words as we believe, we anticipate, we expect in this presentation this morning and you are reminded that forward-looking statements contain our judgments about the future and they are valid only at this point in time we do not hold ourselves out to update assumptions or other factors which underlie our opinions about the future at this point in time. The first quarter results are shown on this chart and as you can see on the revenue line, revenues came in at the 2 billion level flat with last year. Expenses improved some 1%, which translated to a $15 million pick up in operating income. Items below the operating income line detracted from the earnings performance and we closed the first quarter at $20 million from 5 million or 2 cents a share below last year. Looking below that operating income line to other income tells the story of the negative year over year changes. You can see the items here on the other income reality normally offsets the seasonal loss at the Greenbrier Hotel last year, it is fully offset this year it came within $2 million of last year's level. Interest income is down reflecting lower cash levels. Our account receivable expense reflects the fees on the sale of our receivables that is actually a financing using the receivables as collateral and that financing replaced some other debt that came due last year. The significant items show up in equity and affiliated losses. ACL is having a difficult time with its first quarter. When we conveyed our controlling interest in ACL to a third party, we fully reserved against the securities that we've retained, but over time since that conveyance we have recognized our share of some of ACL earnings based on the equity method of accounting and in this quarter we chose not only to recognize our 32% share of their losses, but to write off the entire 14 million that we carried on our books. We chose to be conservative. As a result, the ups and downs of the continuing earnings of ACL will not negatively affect us and if our equity position in ACL should change in the future as a result of transaction anything that we realize will be purely upside. So, another income that we had $31 million of expenses compared to the 5 million of last year of the biggest item being at 14 million non cash write off. Turing to surface transportation as you can see the story is the economic situation, which has reduced the traffic levels. The net reduction is some 74,000 if you exclude the strong uptake in our coal movements our traffic levels are down more than a 100,000 loads year over year that is looking at the non coal portion of our revenue based at the 9% decline, so the national economy's impact in our businesses is significant. That negative revenue affect however, was offset by two positives; strong utility demand for coal, we are up from 4 million tons 45,000 coal loads and I am pleased to report that inventory levels look like that demand strength will continue. We have also continued activity in our pricing initiatives and as you look into the details of the flash report, you will see that in the merchandise area, we are the biggest sensitives to those pricing efforts hits our average revenue per car is up some 5%. Turning to the expense side of the house the big story is the improved network flow, the improved operating situations at the railroad. Network fluidity allowed the company to reduce its train crew cost some 23 million. There is a partial offset from some early hiring anticipating the railway retirement legislation and some inflation affects which took 15 million offset, but the year to year improvement is very significant. Asset productivity moved in the same direction, equipment rents are down some $32 million that reflects 260 locomotives that were sent back at the beginning of the year and a much more favorable situation in terms of turn around and car inventories on line. Conrail expense improved some $12 million as the vying down of prior activities of Conrail lowered their costs by that amount. We had some increases fuel prices were some push fuel cost some $15 million higher than last year. Labor costs were up slightly reflecting inflation and some additions in the maintenance area and depreciation was up some 9 million a little more than usual because we had some least buy outs and least terminations last year and those assets now show upon in our asset base. Turning to the net or operating income side of the house we earned a $182 million of rail operations produced a 166 million of that operating income at the railroad was up $19 million on a $17 million revenue increase and 16 million of those earnings were logged at CSX Intermodal where profits were up $3 million on an $18 million revenue decline. Fully half of that revenue decline was traffic that we pushed off the system as we restructured our operations in the Atlanta area. The story for the quarter centers on service levels. The more fluid operation the good service has restored our reputation with our customers in fact enhanced it and it is helping our ability to take the pricing actions which our marketing folks are taking and it is also helping our ability to take more cost out. In our network more than $40 million of cost came out, if you look at the Conrail in the Western Network served by Intermodal there is more than $50 million that came out of the cost based and we had partial offset as I mentioned in fuel up some $15 million and in the maintenance areas as we do a little spending to strengthen our infrastructure. We have intensified the focus on the roadway inspections, the slow waters are coming down. We are improving track conditions and that too is having a favorable effect on the operating and service situation. In the mechanical area, we've benchmarked our repair practices against non-rail repair companies and we found that our tendency to either do a rebuild a heavy repair or a very light patch repair really should have bit more of variety and we reengineered our repair specifications and we now differentiate to a much larger degree. We have as a result of this benchmarking taken a $150 million or $50 million a year out of our three year plan of four car repairs and actually believe we can restore more capacity to our fleet. As a result of that cost take out which is mostly on the capital side, we are doing more expense work on our retracts and it is actually prevented and are preventing certain cars from falling into heavy bad order or getting another 2-3 years of life before they go in for a heavy repair. Taking just a little different look at the earnings several of you have raised questions about the first quarter performance compared to the fourth quarter and so this chart continues the quarter over quarter comparison that we shared with you last time. As you can see the recessionary forces hit in the fourth quarter that is normally a quarter where we are seasonally very strong and you can see rather than improved from third quarter loadings the million 791 was a substantial decline. In the first quarter, we see the seasonal effect of somewhat lighter traffic levels and that translated into $11 million less revenue first quarter this year compared to fourth. Energy conceded a billion 620 our expenses are up some $12 million. Fuel price was actually favorable on the first quarter compared to the fourth some $20 million, but the seasonal effects on expenses overshadowed that in the first quarter we have large numbers of our train men and an engineer returning from vacation and so our extra boards in reserve pools swell that cost us some $10 million compared to the fourth quarter, utility expense is high in the winter months that costs some 9 million and all those few price was favorable our fuel consumption rates go up in the cold weather that is another six. So, we had 25 million in what we would consider as seasonal impact and the remainder of the expense increase fell principally in the labor and fringe area where our productivity gains which came in the form of roughly 600 people coming out of the work force only offset some 80% of the year to year inflation. In addition, we had some pension payments, which are reflected in expense to people who are part of the pay role and we had some incentive compensation accords which were absent in the fourth quarter because we believe our bonus pay outs this year will be significant with the improved results that we expect. Turning to the marine services companies these smaller businesses are in the $12 million in operating income of world terminals and CSX lines lost 3 million. At world terminals, we expect the growth in trade to impact that business very favorably. This quarter revenue was down however, the largest portion of terminals operations is in Hong Kong and our port calls that appear in Hong Kong were as strong as they were in last year, but our principle customer Hahn Chin had lost some traffic to other carriers and so their ships were lighter and our lifts were down. In addition, we handled a lot more transshipment or relay cargo as opposed to cargo going into the Chinese mainland and so what revenues were off hurting first quarter results. We do expect to see year over year improvement when the full year is in. At CSX lines this first quarter suffered from roughly $4 million in mask activity of both slot income and terminal income in the Puerto Rico trade roughly half of that was offset by improvements in profitability in the Pacific operation. As you look at the flash at the end of the first quarter you will see that we used some $265 million in cash in the first quarter the largest share of that some 125 million represented a tax payment to Uncle Sam occasioned principally by the CTI gain that we've recorded last year. I shared with you last time that our plan for the year is free cash flow within a $100 million of break even and we are ahead of that plan as we close the first quarter that of course implies that we will have positive cash reversing that outflow in second half of the year. Operationally, the name of the game remains to deliver superior service and we think by doing that and maintaining the smooth operations that we currently have will enable us to meet our marketing objectives and further our cost objectives as well. With that I will turn it over to Michael J. Ward.

Thanks Paul R. Goodwin. Well, I am pleased to be able to tell you today that we continue to make strong improvement in all of our key measures which is really a process started in the second quarter of last year and we still continue to have some pretty strong momentum in all of the key areas. First, I would like to talk a little bit about service. Our service continues to improve obviously its a dramatic difference from the year ago, but is also on a continuing upward trend. There is one true measure of how we do in our service and that is what do our customers think about how we do in our service and recently I have had the opportunity of the Pittsburgh Traffic yard which is large gathering of shippers to tell that the year is well at a recent national freight meeting that was held a couple of weeks ago. To touch a lot of our customers, I am really happy to report that we have had zero complaints about our service. It is remarkable to be using find somebody to turn happy. We have zero complaints many compliments and a lot of conversations about how do we take some of our truck related moves and start moving then back to rails. I am pleased to tell you the true measure our customers are real pleased about what we are doing on service and we are continuing on an upper trend there. Secondly, if we look at the volumes as Paul R. Goodwin mentioned, our car loads were down about 4% overall per service transportation in the first quarter. Fortunately, our revenues were basically flat. It is pretty good that when we think about in the down economy, car loads were down, and revenues were flat. Now, revenue is driven by the pricing programs which you recall we started last year and continues into this year. And the fact that we are providing this better service, we are providing better value to the customer, help support us in that price increase program and has good vibrancy, and the services also allows to start thinking more about truck diversions. And William J. Flynn is going to give us the presentation today about some of the successes we are having in nadobine which is helping this offset to some extent some of the economic weakness we see out there. In the cost side. The cost continued to come down. Year to year we were down $23 million overall that despite fuel being up, fuel price alone was up $21 million year to year on a quarter to quarter comparison plus we have had big increases in wages and big increases in health and welfare on a year to year basis. So to bring it down on absolute basis 23 million year to year, I think it is a pretty good cost take out plus obviously more to do and how are we doing this? The same way we talked about the core as it is really three layers that is one from the run a more efficient operation some of the adjusting inefficiency that comes with the running of core operation they drop out automatically and we are seeing this continue to drop out. Secondly, we are putting us some pretty tight cost control to helps drive out other unnecessary cost. Last time, I think I told you we will get some more between 1300 and 1500 head count reduction this year in the first quarter we got over 670 of that. And we are doing without special charges, which is running a better leverage taken advantage of the normal rush out there. And finally the third layer is structured long-term process improvement. We've revitalized our pick programs. We expect that to produce well over a $100 million this year as well we are instituting the six-sigma process to the effect to help us with long-term process improvement, which is the way you really drive cost down in a long-term basis and we currently have 69 black belts in training. On the safety side, we showed some big improvements 23% down along personal injuries, 47% down on FR rate derailments and all this is a big improvement we are not really satisfied with this. They are reaching our internal stretch goals. We are not where we are going to be in safety, we are going to continue to push this. We have real good support from our union leadership who are very supportive of our efforts in this arena and we are going to even show more dramatic improvement. So, while we've made a lot of progress we have not made the kind of progress that I am satisfied with. And finally, I think to keep home on people side of business. We got our leadership team that is aligned. It is focussed on delivering results and working as a cohesive unit that has real power. The other thing we have is the morale that is improving. Assuming nature to be one of our part of our winning team, when I talked this to our employees, I meet them in the headquarters, I meet them out in the field, the e-mails that are sent to me are people starting to feel like winners again. When you get that, that really has that improvement has its own momentum. Its own motivation has even moved to higher levels, so I think that is a real positive as we go forward here. I mentioned our improved services have really pleased our customers, but it also helped some reducing cost. There is a copy in your packets of all of our 18 key measures as we normally say you are not going to get through one by one today, you could look at those, but in the first quarter we made 14 of our 18 goals and the four we missed we will relatively cause. On a year-to-year basis 17 of the 18 key measures are better and the only one that is not is amounts of salt water it is rather fix in our railways now. But, I would like to highlight a few year-to-year comparisons for you. As I said safety is 23% improved, cost on line down from 267,00 to 245,000. Today we are actually down by 241,000. And rate grows 71% improved. Next got me excited our locomotives set back last year our locomotive set back of the train is ready to run and there wasn't power available for us to move. We are averaging in the first quarter of last year 900 hours a day. We surely averaged 53 a day. Our 94% improvement of what is really exciting about that besides that allows us to provide better service is how we did it with a lot less locomotives. We are 250 less locomotives we turn back to the leasing companies, but in addition to that we currently have a 107 locomotives power and we had 53 off line. So, basically the 400 less locomotives roughly 10% less locomotives drive at a dramatically reduce locomotives set back hours. Velocity from about 18 miles an hour up over 21 to rail from numbers 35 hours down to 26 in the half and is continuing to move down and our own time originations which is the key service measure from 51-85 up 67% improvement. So, all these things besides providing better service help drive out cost and we estimate these are in probably produced about $37 million versus improved cost structure while providing better service. Finally, just to talk quickly on the second quarter outlook. We see some favorable sensitivities: Coal should stay strong. It has been a good point towards here in the first quarter, the inventories stock power is below normal. The production is increasing. As you know and many of you know that the spot prices per coal are up pretty handsomely and the mines are finding additional ways to open some beginning scenes not of in the mines, but more opening new scenes. So, we see good demand and increasing production on the coal side. We are in the cost. We are going to continue to accelerate cost take up. We are more aggressive goals in all of our measures in the second quarter and we are obviously going to drive some of the longer term initiatives like out pit teams. Pricing, we got good vibe in doing the pricing program. Really it is supported by the better service we are providing and it has been lower procedures as well the procedures pricing increases which is pending in the market place. Truck conversions, these are starting and then William J. Flynn is going to be talking to you about this next , but that is pretty exciting that major was starting to win back some of the businesses right fully ours. And obviously, we are going to continue our long-term process improvements the late receives for the future years of increased cost effectiveness. The risk throughout the economy is going. I was looking at modest signs of light on the automotive side in the last couple of weeks is that real, we are I do not think any knows yet. So, I think the big uncertainty is the economy, fuel might be a little bit of a raw carbon I think the economy will probably the primary potential negative driver. Now, I would like to introduce William J. Flynn. William J. Flynn is our Senior Vice President of Merchandise Sales and Marketing. William J. Flynn this morning is going to discuss the results in all of our markets might gift us is normally here is not here today. His wife Mary had surgery recently and might where he should be with Mary. So, William J. Flynn is going to cover all of the market for us and then he will talk some about our new products.

Thank you Michael J. Ward. In this last part of our structured presentation I am going to cover two things. I am going to spend a few minutes and drill a little deeper into our first quarter commercial results, although in many of key headlines this has been touched upon and discussed, but I do want to share some perspective on several of the market segment and then I would like to do really a deeper drill and talk to you about new product development and how we see new product development as a real key to grow real revenue and more importantly grow real revenue by bringing truck traffic back on to the railroads. We will talk about price and we wanted to you this slide here, a simple slide, but I think I dramatically shows the price methods of the first quarter that drilling has been down 74,000 loads, revenues were flat and that it was really driven by the strength of price increases, it is really driven by the strength of a structured initiatives that is sustainable as we go through 2001 and then to 2002, so I think the additional headline that one would want to take away from the pricing story that we have already talked about is we have a structure, a strategy and really an organizational capability in place. To go out an continue the focus on price to rule out and continue to capture a share of the value that we create for our customers through the better service products that we are able to deploy for them. Also, if you look at the detail in our quarterly flash, I think you will see that we talked about merchandise being up 5%, but I think you will see as you look across each of our business units and product categories that we realize price increases across the boards. So, it is not only a merchandise story with a much broader CSX transportation story. Now, there may be a little bit of mix and length of all driving some of this RPC, but the analysis shows it really is predominantly driven by the pricing initiatives and by analyzing each contract as they come up and determining what we can secure with our customers. We would like to spend now a little bit of time on our commodity markets and one thing you should keep in mind, I think in the past we used to have a debate internally can we raise prices and can we grow the marketing grow volumes at the same time. Well, we will be on that argument. We are clear that we can do both. Certainly, we are affected by economic sensitivities, but even in the times that we find ourselves there are opportunities for growth in some of the more economically sensitive markets. So as we told you last time, and as you know the story on the economy continues to be fluid and the issue of visibility and when will the economy turns remains I think is the foremost question for everybody. If you get ahead with the volume history. Let us look at the changes that we see here today as we think about the second quarter in moving into 2001. We have got some color coding here on this chart, so those commodity goods which you have seen in Red we have seen move unfavorably from where we saw them at the beginning of the year and the one Green which is automotive, we have seen a recent uptake in production and lowering of inventories on the sales flow and so we have some hope for a bit stronger auto market than we had when we were here in January. I am going to talk about the several markets moving from left to right starting with unfavorable moving to the favorable markets. The Modals markets continues to be affected by automotive demand and our volumes in Modals are down, the hidden story within meddles as we have had a very successful sales campaign working with our key customers and we have converted a fair amount of traffic from truck to rail as these customers as their supply chain cost and margins of under pressure are animated to see where we can provide a solution and we will come back and talk a little bit more about that in our product discussion. In our paper in force we have been affected by a combination of a lower uptake in housing stocks and housing stocks were favorable for the full year they were not as favorable in the first quarter particularly in the south and paper products are affected by the industry structural trends that are going on, as that industry is consolidated as a large paper companies now make decisions about where to produce, how much to produce, how to go to market, we are certainly feeling the effects of that structural change. There is also a good new story here as well is that is newsprint and again that is part of our products discussion. We started out very strong in chemicals in the first quarter very strong plastic shipments coming into the markets strong textile moves kind of bully that through January and February, but is of late we have seen plastic or textiles and petrochemicals begin to taper off fairly dramatically, so it is little unclear to us where we are going to be at the end of the second quarter and so the market we are watching closely and we will know more about when we report you again 90 days time. Moving over to this the market we call flat it is a significant move for us to see automotive move to about a 16.5 million vehicles sales in North America this year. We were much more pessimistic in January if it holds it will be significant for us because of the loss that it affect our medals, our chemicals, and to a certain extent some of our paper shipments, so it can be a key driver for several other commodity goods and so we are setting that anxiously and closely. There have also been a bit slow in the first quarter principally driven by weather more than aggregates construction and infrastructure rebuilt have been slow January through March, but we anticipate where we cover the short fall in our plan as we move into the spring in late summer and we have the capacity in the service that will allow us to do that. Top state and fertilizer likewise suffers from the combination of both weather as well as a weakening in global demand. There has not been a lot of input up in the North and mid west and China and India have lessened their inputs this year and so reduced demand overall. As a result, however the flooding on the Mississippi river systems there may be a near term uptake once the waters recede and farmers need to placed new trends in this year in the affected growing areas. We initially saw a favorable we are coming into the where is strong and felt that post starting this new year we will provide good international volumes for us. We reasonably well within our national, but have seen our domestic markets affected both in premium as a result of slackening retail sales and consumer volume patterns as well as Paul R. Goodwin has already referenced some marginal markets that we acceded in the third and fourth quarters last year and are seeing the year over year effect. Now favorable really talks to growth and it talks to grow as much to have buying new products as it is just by the excellent service that we have been able to provide to our customers in the first quarter and so we have seen growth across all of these segments including consumer it is a product story any growth including consumer is really truck conversion and we are going to get into that in some detail. Agricultural products as a combination of service in truck. We have learned a very solid unigrain train network and our customers have really taken an advantage of that to extend and grow their participation in the explore grain markets. In fact one would look at in detail you may be flat year-to-year on seed grains principally driven by good crops in North Carolina and Virginia as well as lower _____(00:35:52) production. But, if you peel the onion one more layer you will see substantial volume of grain both and we are going to export markets. Its is our ability to sustain monthly turns greater than three, three times a month that has provided real bottom-line benefits to our shippers and they have taken those benefits and translated some of that into more competitive pricing and thereby in their markets and the other agriculture stories that converge on sweetners that particularly coincides in the last from truck to rail and moving on our network and to our transport terminals again, grown business and showing significant strength there. That is a story will come and spend a bit of time on in the minute as we talk about products, but I think it would be, we must not to spend at least additional minute or two on call, which has been a real success for CSX in the first quarter. Some of these points we have already talked about utility stockpiles remains low. So, as we come into the second quarter and the balance of the year, we anticipate strong volumes to continue. The only constraint on volume at this point is production at the mines. Demand certainly exists, has the capacity to carry those additional volumes. What we are hearing from the producers is that they anticipate that they will be able to increase production somewhere in the range of 4-7% as we come into the second quarter, again this is their estimate that may something like 7 plus additional tonne for us in the second half and the capacity and service clearly are there to hint at that at minimal incremental cost. We are excited about the long-term perspective as well. We are encouraged that as a new energy policy has crafted that coal will be able to bring more attractive energy source and will play an important role in that policy and in our energy future. Finally, we will hope that at some point, we will be able to come back and talk to you in the near future about new coal fire plants that will be located on CSX Transportation network. I would like to now move and talk a few minutes about our new product development and how they are using new product development. We really ramp up truck conversion and revenue growth. And so, I would like to share some insight on what we are doing, what kind of results we realized early on, and what we expect. We are talking about breakthrough products. It is certain that nation of charge about the product orientation because it takes our organization into some new competitive space. It is about growth; you know of our market shares in a relative basis with trucks and other mode of surface transportation and so you have to conclude if at all on that side and the real key here is our ability to leverage the existing network that we have. Leverage the service improvement that we have been able to put in place and think from a morbid truck-like product orientation and then go out and target markets that are right for highlights in growth for the railroad. The whole challenge here is to position product and services that from the customers perception additional value and thereby and sent the customers and make some changes in supply chain strategy and to make some changes in his pipeline but he is motivated as well because of the efficiencies and bottom-line economics that you can realize as well. And so, that is actually the formula to drive merchandise growth. In the short term, the easiest channel to growth is new business from existing customers. They are already well served, they have rail as a part of their supply chain and margins are under pressure. There sure is a lot of upsides that market share that we can gain. But as we move along into the mid and longer term perspective it is also about getting new customers throughout. Maybe they have used rail, but it has been sometime, they are not a rail user today. So, as we build products, as we build both the referencible customers with our existing base and beginning to get new customers to rail, we think we can accelerate our sales cycle and conversion cycle into moving forward. And if we get the formula right, the products there that has market targeted effectively for promoting and securing our customers and then realizing the benefits that we are talking about sure we can raise prices or at least get a very good price point for the value that we provide customers. I am going to talk about four different types of products and there will be another thread that is common to all of them. I am talking about our addressing ability to build revenue and to secure new business trends. But you will also find common to all when we execute we also reduce our cost deserve either by eliminating security, reducing car days or reducing intermediate handling. And so, the service modal does work along the terms that Michael Ward has described earlier. It not only provides a platform for growing our revenues, but it also provides the engine to reduce cost and increase productivity. Early results indicate that we garnered about 20 million of additional revenue in quarter 1 over quarter 1 2000. In these product lines, driven by new products. So, it is new moves, clearly new OD pairs, new freight flows which have great success in our food and consumer products. We talked to you in the past about the joint products with the union pacific, the express line. But our success is not limited to that product and not limited only to refrigerated frozen in total. But we have had very strong success in canned food stuff, which are an excellent long home market force. We had good results with alcoholic beverages and beer and wine and in particular, as you think about some of the flows input from Mexico lines from the west coast and east there is nice long half flows that can really provide a superior end-to-end product and share the benefit if you look at a long call with our customers. In solid wastes and other waste products are really growth opportunities for us as you think about the challenges that major urban areas have and they need to salt floor, lentils that are add or above capacity only have to think about the fresh coast line field here in this island to imagine the kind of challenges that have to be solved and we think we are providing the solutions and provides good growth opportunities for us. And finally, newsprint, I will talk about more of that in a minute but even in the forest paper products industry, we will receive interaction and growth challenge and there is some real opportunities in these converted fair amount of business from that submarket segment. We think about our network in the context of eight strategic corridors. In fact, we denominate them along as they run parallel to the major inner states, the I-10 through the I-95. We do that really for two reasons. One, just to continue to reinforce across the organization that would any new product we choose to deploy, we choose to go after has to feel and be in truck like from the customers perspective on an end-to-end solution. We have got really four major north and south corridors and four east to west corridors. So, our challenge is to think about the corridors. We really understand the density of the freight flows that exist in-between the major origin and destination city pairs on these corridors and then in understanding this markets really begin to pull out, to really segment in meaningful terms what are the markets we can segment, we can serve, what products need to be put in place and then think about how are going to do that and then how to clearly will involve other channel partners that could be other class I railroads, on either east, west or north and south segment. Certainly, short line railroads as they are the key part of gathering and distribution network and on the two point-to-point product, often times that will involve flow through warehouses and truck door-to-door services, and we can also and do leverage our trans low product as well. There are four basic product lines. The first one I will talk about each and then show you some example. The first product is what we call our express-link. Express-link service and express-link products target longer haul volume flows. The focus there is speed and reliability and the key to speed and reliability is eliminating intermediate handling. So, you have large either complete run through trains or large run-through blocks that are handled a minimum amount of time in intermediate yards. And as you think about the service designed here run-through trains, minimizing any intermediate handling. You see that the whole service designers mutually will be enforcing for speed and reliability and equally takes our cost. These things were not touching. We are touching the freight fewer times as it moves through on an end-to-end basis. In the trends, there are nothing new, but we believe there are many new market opportunities that we have not tapped and that by bringing a uni-train product to market to we can develop new business, we can begin to target shorter hauls before we did not think we could serve profitably because the whole batch network was just too higher cost to serve. In a unit service combination, there is something that were pioneering in CSX transportation and what that means is most railroads will operate their automotive, their intermodal and merchandise networks dedicated to street networks. What we are finding is that there is available capacity on existing automotive trains and existing intermodal trains. We can identify the right OD segments pairs. We can put merchandise traffic on those trains. The merchandise traffic enjoys a intermodal-like service if you will. In general, we run these kind of trains in lines where there is not enough volume to aggregate and run on express trains on express-linked service. So, it is kind of another way to solve the service and the operational equation without incurring significant incremental cost. In the last market, I want to talk to you about is watership service. It is both a service and market were we retained large upside growth opportunities existed in the railroad. We think we will secure about $80 million as new revenue on our express-links in 2001. We have 5 express links in place. We are targeting on additional 7 and again on that cost and productivity seen, express links generally require a very minimal start-up cost and running cost because for the most part, we are reconfiguring the existing resources in the context with locomotives in ___ and also reducing the intermediate handling putting a better product that lower cost in place and as I have already alluded to you, our services are branded and promoted to target specific markets what we think the results exist and so we have products like the line connection which serves the line moving from the west coast to the eastern half of the United States. We have the beer run, which serves the Corona, and the other bears coming up from Mexico into the eastern markets and northeast markets as well. And we have depicted on our I-95 quarter here, we have another product such as in place the ___. Print runners target the newsprint market heavy production up in northern England Maine and in Canada and we have grown our newsprint business significantly as I mentioned earlier at a time when overall industry shipment of newsprint was down by 9% due to reduced demand. Florida express is a product that runs from New Jersey and New York metro area down to Florida markets targeting three principal markets, northern Florida, or Jackson Vile. The very significant market that exist on the I4 between Tampa and Atlanta where there is huge distribution of food and consumer products and ultimately down the south Florida market that served Miami as well as the export markets from Miami. The Carolina express is a new service that were putting in place targeting consumer product may be from Carolina again north now into the metro New York and New England area. We think we will get about 45,000 trucks off the road conservatively. With these products this year, we think it really sets the stage of meaningful growth going forward. We talked about the Uni-trains we are targeting about 85,000 trucks this year. We think we will get about $40 million of new business in 2001 and I just wanted to share with you, we think there is $6 million of annual saving through these trains becoming an reduced car miles, reduce car days, and reduced intermediate terminal handling. We think for example of that in Municipal solid waste is a huge market opportunity. We chatted a bit about that already. We are running products, uni-train products on south from New England and New York area into major landfill in Georgia as well as targeting flows coming from Miami as well as Lauderdale as they have to deal with the same issues of disposal and we think there is also good growth in related projects such as treated soils and dredge materials. These new unit trends are solely focussed on this market although this is one of the significant growths. We think there is good opportunity in steel and metal products, ___ 00:50:25 of less than 200 miles, as well as in wood pulp and in aggregates. We talked about the interunit train, the whole idea is to provide the best available service to merchandise customers, and in fact, we are moving products on to the intermodal and automotive trains, that is how we do. We are looking at about $20 million of business in 2001. We deployed about 15 interunit services starting from October moving forward and we think that that saved us about $6 million in expense as well. An example of this, one that we are particularly excited about is product that we are able to put in place for Tropicana. Tropicana moving on CSXT is not a new story. But the story here is that into the Cincinnati market, we were running two dedicated trains a week for Tropicana, that is as many cars as were available. What we found was that by combining the Tropicana flows with an existing intermodal train that had available capacity, we could offer five daily services and with the same car set provide additional capacity if you will. So, we have grown the business about $1.5 million for ourselves. We crew start by 100 a year. We saved about half a million dollars. The Tropicana has also gained lower cost transportation because the days they did not have the unit train they were moving truck and they are getting better yields and turn on their equipment because ___ 00:51:55 moving Tropicana private cars. Last market I would like to talk to about is really an exciting market that we are seeing coal has great potential for the future and we are calling that the watershed market and we are really leading that discussion with our partners, Western Railroads. The watershed is best described as the band 200 miles of east of the Mississippi and 200 miles west of the Mississippi and because of the historic interchange of the river, it was not considered an attractive market for railroads to serve. The cost of service is just too high from the railroad point of view; the product was not attractive from the customer point of view. This slightly kind of depicts the traditional product approach that the railroads had versus what we are proposing. And so, in the prior traditional services, we would have several local trains to pickup and deliver, several intermediate trains plus potentially a bridge carriers that go 400 miles, we were looking at possibly 10 days service, six trains, and five yards, not deliverable really. But what we have been able to do is a kind of change the ___ 00:53:04 model and working with minimum partners, think about simple run-through trains with a pickup and delivering local one, then you get a three day product, and that is sellable and there is lot of efficiencies there that can be gain shared with the customer and it is really a large market. If you look at some of the flows with Wisconsin and Michigan, Novak to Grand Rapids, 700 trucks a day and then reasonably the other market. And so, we think that this is an area of great potential that we will have to come back and report to on that in the future. We have got action plans in place from both service design as well as sales and marketing. So, kind of enclosing we think that there is about a $100-120 million of new annual business in 2001 driven by these products. It is targeting about $100-125,000 trucks. We really think that it is a key driver of product orientation. These products are key drivers of revenue growth and we are in the phase now simply launching and learning, and as we launch and learn, we think we will improve our ability to target to do sales and marketing cycles, and really be positioned for top-line growth. Thank you.

Okay. Thank you William J. Flynn. We will take the call for the question and answer. Let me remind to those that we have people on the telephonic hookup and web hookup. So, please give your name and your affiliation, so, we will know who is asking the questions. Scott, we will start with you I guess in the front.

Great. Thanks John W. Snow. Just a couple of questions. One, we did not talk about was, I know you can say that one, where are we with the union contracts and where are we in that process and then secondly, can you give us any outlook in Washington DC viz. that the rate of retirement is ___ in the changes and that was inflation and perhaps deficit gilt tax? John W. Snow" Sure. On the way of this round of bargaining, we have reached an agreement with the BMWE which is scheduled to go out I think on May 1st for ratification process that culminates on the end of May. We are hopeful there that the agreement will be ratified. The agreement is one that is good for both parties and its addresses this terribly important issue of spiraling healthcare cost, it puts in place for the first time a major cost sharing on healthcare. It is a real breakthrough for the industry. But it is essential that we get that sort of breakthrough. We are going to control spiraling healthcare costs and be able to continue to pay our wages and all of the economic studies of course make it clear that record compensation is a combination of a number of factors and if healthcare costs go up wages tend to go down, it is the nature of the equation, and the holds that we have with BMWE is a way to bring containment of our healthcare cost going forward. We need a healthcare cost containment mechanism where people become more intelligent choosers of their own healthcare and discipline their healthcare costs more effectively. So, we think it is a very important breakthrough. We in this industry simply have to find a way to contain those extraordinarily spiraling costs. On the UTU, we have reached an agreement. It is not yet gone out for ratification, but I told that we will be going out to presently both the UTU leadership and the BMWE leadership, are making a whole-hearted effect to educate their members and make sure that the members understand the nature of the agreement and the advantage of the agreement that they have structured with us. On the legislative front, it is always difficult to predict what goes on in Washington, but I say we are in very good posture on the railroads retirement. As you know, it came within hours of getting passed last year in my view, if we had more time, we could have gotten it done overwhelmingly past the house and then had some 80 co-sponsors in the Senate. It has now been introduced. I was privileged to participate in that process and in-house infrastructure hearing room along with some brethren from rail industry and from the rail brotherhoods to introduce that legislation. It has broad based bipartisan support and we anticipate it moving effectively through the Congress in this session. The biggest problem we ran into last time was the lack of time and the arguments that were raised in opposition to it could not be fully addressed and responded to in the limited amount of time on a crowded docket at the end of the session. That problem would not confront us this year. It has been introduced early, it is going to have hearings early, it is going to be well considered and I think it has got a real good chance of getting through and of course, that is important to us and important to the industry as a whole. We calculated that at the end of three-year period we are at something like $70 million ___00:59:09 effect. The fuel price, the 4.3 cents fuel cost, is also being pushed hard by the railroad industry and the Association of American Railroads and again I think we have got a compelling case after all, we are now talking about surpluses going out into the future as far as the eye can see whereas few years back, when that legislation was passed, all we were talking about was deficits going as far out as the eye could see. So, we have the logical case. We need to find the way. I think we have got a compelling case before us. There is lots of support because I have gone around and talked to members of the Congress and House of Senate and both parties. There is lots of support for an immediate need to find the vehicle. Of course, the tax stage is now being occupied fully by the Bush tax proposals that at least in the first ___00:1:09 going to be limited to personal tax reductions and not involve corporate tax deductions or other matters like the fuel tax, but I think we do have strong support for in both the administration and the Congress and the problem is finding the right vehicle and we would not, in my view, find that vehicle until the Bush tax proposal and budget proposal get dealt with by the Congress, but it is one that I think has a very good prospective of all of my passage within this session of Congress and that is what something in the order of $25 million ___. Jeff, you have it next.

Thank you. This is Jeff Coughman with Merrill Lynch. First question for Paul R Goodwin. Paul R Goodwin, you gave us a bit of look at the free cash flow that seems to be consistent. You talked a little bit about a 150 million potential cap ex savings with what you are doing with the cars. Could you give us an updated view on your capital plans, has your cap ex target been reduced at all and how is the makeup of the cap ex budget change? Paul R Goodwin R. Goodwin: yes. When you talk about plans, you are talking going forward. I guess I have to say in our last night comment to elaborate, I guess I would say we think of the normal level of capital expenditure for our network is in the order of $1 William J. Flynnion, give or take 50 million and as a result of the work at this mechanical and finance ____ 01:01:43, we expect to save $50 million. As you know capital use here depends on targeting various areas and targeting opportunities that pop up, such as what William J. Flynn described. So, that number will fluctuate. This year, we are on a relatively skinny capital budget, but within that budget we have expanded the amount of capital invested in the track structure and I would say compared to normalized level, we are probably on the low side in terms of investment that we are making in equipment. You will recall that we accelerated some of our locomotive purchases a while back, but that is roughly the order of magnitude thinking.

Okay, so I guess that to the extent you get savings in one area there is other cap ex should fill that void for the time being? Paul R Goodwin R. Goodwin; Yes.

Okay. Second question for John W. Snow, Scott asked you to address two legislatives issues out there. I would like to ask you to address two others. First of all, given that we have had the hour of hearings, particularly Mr. Mannatis' comments that they were going to take more of weight and see added to. They were going to get up the speed on what has been going on. I guess with respect to the decision that should be coming on June 11th, have your views changed on that at all after the hour of arguments and second of all can you give us an update on the mountaintop goal issues?

Okay. No my views have not changed. I think the signaling has been pretty clear as to what is going to come out of 582. The door would not be closed on mergers but the bar will be raised. There will be a heavier evidentiary burden on the parties and they will be required to meet tougher test on competition, but scalable tests. I do not think a non-scalable war is being created here against mergers. But I think it will bring the industry for the next two or three years to focus more on alliances and joint ventures as already indicated before and see what we can do through those types of activities which I would not say are being pursued with quite a vigor by the railroads today. We have activities under way virtually with every other major railroads in the United States, one kind or another marketing initiatives and initiatives in the MIS area and e-commerce and initiatives in the cost reduction, sharing of assets and facilities, run-through trains and all sources of things. The industry is really moving strongly, I think in the direction of greater cooperation, less parochialism, more outreach, and we are going to find I think that we extend the attractiveness of our service that we offer. We become easier to do business with and we can take out costs and I think whoever becomes an applicant for a merger will have to demonstrate they have done that before the merger would be considered. It is an adaptation of a well known doctrine in any trust law that a merger of transaction will not be approved if a less and a competitive way to achieve that same objective is available well until the industry has demonstrated since joint ventures are inherently ___ 01:05:47 less at a competitive mergers until we have demonstrate that we have pursued the less at a competitive alternative namely alliances and mergers, I mean alliances and joint-joint ventures. I think the barriers will be very high probably insurmountable for real mergers. On the mountaintop removal, the matter is now going before the fourth circuit, which is headquartered in Richmond, Virginia. I am told that we have drawn a very able panel by the lawyer trying the case and that certainly is encouraging and I think the political backdrop against which the case is being tried, the change of administration and change of policies on the central issue here certainly are encouraging and ultimately the play out of mountaintop removal is in the hands of government regulators who apply the statutes. I think for regulators take their cues from the administration that they serve. So, I am greatly encouraged on the whole coal pictures, CO2 decision was critically important decision and the training task force I think is going to come down with a set of policies which are much more disputable to coal than would have been the case had there been a Lieberman task force or a Gore task force. So, I am very encouraged on all that. I guess Jul, you have the microphone next.

Yes. Hi John W. Snow. Thank you, from JP Morgans __01:07:43. Two quick questions. One on the cost side of the story you have done a great job in a couple of quarter with more to be added, I know you do not want to give us any numbers, but can you just give us a sense how much is left particularly looking at page 4 PNS on the service improvements you made in the ___ 01:07:58 and also Power, is that kind of bottom here or are you still up there is still an opportunity and just may be looking at the whole network and running efficiency, what aimings in ball game are in for us too who do not have their hands around kind of improvement and the fast opportunity.

Jul, I still think there is some pretty good upside obviously on the ___01:08:14 when we were down in the 25 ranges, not the whole lot of room there. There is just one little anecdote that they may be of interest when we went into this year, we took 250 workers and returned them off lease. We got a little bit concerned that the setback hours might ___01:08:27 had gone up into the 150 range and if they did do that, we obviously take action to make sure that we are providing service and then we had the really strong coal demand on top of that. So, we are really concerned that coal does a couple of ____01:08:44 in locomotives in terms of service. A couple of five to six weeks in a year, we get the 250 off line. We had 107 part, we had the 50 units off line and we were meeting all the needs. So, I don't think we yet know on the car hire side, on the locomotive productivity side, how good we can be. So, I still think there is some pretty significant cost that can come out and especially in those arenas.

On the head count, are you still going to stick to the forecast you gave, or does this still seem you have been talking for a long time that you had a lot of excess people, to look at, maybe 1500, is going to get a bigger number? Well. They did the two issues within that. One is where is the economy going. Obviously, we have some decision points we got to make in the June timeframe about additional potential locomotive leases or hiring type activities. If we do get 30-60 legislation passed, as we are hopeful we will, ___ 01:09:41 hiring toward the end of the year. We get people into the training modes, so that when we get into the year 2002 these people are available. I just remind you that the training cycle for locomotive engineers is about nine months lead time. So, we really are going to stick to legislation, it is going to go through. I think we would see some, we are in fact hiring people in preparation for that and then see the big downturns in the year 2002. So, again, we are finding that we are going more efficiently and the head count may be a little bit, but right now we will stick with the 1300-1500.

Well, last to William J. Flynn quickly. William J. Flynn, could you minus percentage of your revenue under contract. You gave me the price increases, are there any significant amounts that you can touch?

Well. It depends on the segments. Coal has about 20% of its business available typically year to year. Merchandise has closer to 60% of its business available year-to-year. Automotive is characterized by several large contracts so that really depends on the aging and cycle of those contracts.

And, William J. Flynn, we are seeing some pretty good signs in the coal setup. Obviously with the coal pricing going up right they are, you know in some cases on the spot market it is double what the long terms prices on a contract basis and we are seeing from what we understand the long-term contract prices as well may be gone up 20-30%. It presents us a better opportunity especially with the way our coal network is running right now. We still have about 4000 of our own open top offers parked and we got about 1000 private cars parked while removing all the production that is out there. So, we think the way we are running is better for the customers utilization and I think the fact that there are these big increases in the coal prices gives us a little bit more opportunity to push on the coal price after the 20% that is available. Tony, I actually think you have a ____01:11:43.

Yes, John W. Snow. Thanks. Still a little bit of followup on Jeff's comments. A casual observer might conclude that the rail industry is a sort of evolving into a VNNS and CSXUP kind of access. Is that an accurate perception given the new marketing alliances that are working and I was wondering if you or somebody could give an update on e-procurement and then I have a quick question for William J. Flynn.

Okay. We are open to do business with everybody and I think that is the basic attitude being taken by the other railroads as well. We want the best possible relationships with the UP and BN in the west and the CN and CP recognizing that on something we fit with one better than with another. But we are not really taking any partners and I don't think anybody else is as well. In fact the matter is there is something for BN, it fits with us better than the UP fits with us and there is something where the UP fits with us better than the BN and we are trying to find those natural fits and take advantage of those natural fits and think about it. It may well be better that way, because if we can take advantage of best opportunities that our network affords, the shippers through the BN as well as the UP and the Northeast and Southern does the same, then the shipping public is getting the best of everything and I would say, Tony, no. I guess I would not agree with that characterization. It happens given publicity ideas, public attention to these new initiatives we have that Will talked about with the UP. But we are also developing some important initiatives with the BN that I think will be equally promising to us. David, do you want to add to that.

I think you have characterized well John W. Snow.

David, why do not you take the e-procurement? You or Michael J. Ward.

I think Michael J. Ward

Well the e-procurement, as you know we did join the e-rail marketplace.dot.coms. My understanding is that what the closure as Tony said, we have selected a CEO __ 01:14:15 and so, I think we are getting the initial incorporations working well and to be honest I do not have more detail on that, but we are going forward. We have joined in it and see some exciting opportunity to help us lower some of our procurement cost.

Okay. Just two quick ones for William J. Flynn. Does an improving economy help you in these sales effort for these new products or hinder you in this cost takeout initiative by, you know, supply chain initiative by some of your customers and this as a followup to that, how big can the new product business be and what can it be in two to five years in general sense?

I think an improving economy helps this, Tony. It is not that we are launching products for short terms gains, because everyone is under margin pressure. What we are finding is that the new products and our sales efforts are converting trucks and we are getting new business on railroad business as before. So, that when the economy returns there should be a significant upside impact to see as such because our core volumes will come back in metals and forest products and chemicals if you will and we have an installed base and a growing phase now of truck conversions. So, I think an improving economy helps because we will have to have more than just price. We really have to have a value of service driven value proposition to encourage customers to make real change in the supply chain. As far as where it can go, the second part of your question, rather than forecast numbers again I will go back to something I said earlier. It depends on whose numbers you look at, but it is rare that we ___01:15;58 about 7% market share of surface transportation, it can only go up, and it can only go up significantly if we execute well. But then in the meanwhile, I cannot talk about.

One thing about the rising economy, if I recall, our discussion of last week at, Jacksonville, we have something on the order of 30% capacity on used, excess, on the merchandised train network today. If the economy returns, I am confident that will over time, we will fill up that network, that 30% on used capacity, but we will do so with the freight that has very low marginal costs. And so, a very substantial part of that additional revenue which will come back to us will fall to the bottom lines. So, in addition to all these new products that we are talking about, there is also just the strength of the returning economy for our load outlook and if that happens we are going to produce very much better bottom line operating numbers and operating ratios. Michael Lloyd, do you have a .....?

Yes John W. Snow. Thank you. One financial question for Paul R Goodwin and then for Michael J. Ward. The financial question, you still have more than 600 million in cash and short term investment about the same as the year ago and yet you are in I think a much more stable environment now. Are you going to be using that cash more aggressively to pay down debt which actually went up, I guess in the first quarter, as we go up in the future quarters, and then the question for Mike is that 670 decrease in people you talked about in first quarter is not showing up in that February statistics that you have in your quarterly flash, head count is actually up 800, so could you talk about timing issue?

Yeah Mike. The 600 million will probably settle down in the 400 million area. We actually have a positive spread in our short-term investment versus our CP and 3-400 million area as what we usually target and we will be paying down with the reduction. Micheal, maybe I was not that specific enough when we were here last time, I was asked where our head count was heading and I said that we would be 13-1500. I was talking about against the fourth quarter numbers that we had over the November number in that record. But I want to address the year-over-year differences. One we did, as you know higher number of people for the 3060. We actually choose not to furl up 01:18:50 all those employes which we could have done given where the economy was in that we had those employees strained, ready to roll and we did not think the first thing we wanted to do with them is welcome to the railroads that are now furled up 01:19:03. So, we worked with the unions to create a lesser payment reserve pool for that and then we had about 500 people in that, it is now about 250s as we are getting our normal attrition. We are taking people off of that reduced reserved payment. We did deep furl up 01:19:20 about 300 people in the first quarter and what we told them is that if they wanted to move to another CSX location, we paid them 10,000 to help them with the moving expenses. So, the year-over-year is somewhat up because of that 3060 hiring and secondly because we did hire a roughly a 100 to 100 quarter more FRA inspectors during the course of this year, which will be reflected in the year to-year numbers, but the 13-1500 I was talking about was against our November count.

Yes thank you. First I wanted to start with a question, I guess for Paul R Goodwin, on the compensation issue. You talked about _____ 01:20:07 with a sense of optimism with respect to the year making some head of accruals in Q1. Could you talk how that relates to last year in the first quarter and am I reading that correctly Paul R Goodwin?

Yes this year and last year, my comments were first quarter compared to fourth quarter of last year and the first quarter we had a consent of compensation accrual and actually it was paid out in the first quarter and we had no further bonus for the entire year. This year, we expect that the financial performance would be such that there will be a bonus pay out and so we expect the making some provision each quarters as we go along.

Are there any details about that that you can discuss with us in terms of what kind of number make for really good year and what does not?

I guess like someone said well, no one wanted to see.

Substantially better than last year.

Okay. The intermodal business, William J. Flynn if I could, ___01:21:22 pretty good results in the intermodal business and they have not really got the Atlanta operations doing what they would like to do in terms of facilities open. Could you talk about the disparity as between the two from what you can see?

Well Gary, as you look at our traffic flows, we are certainly very heavy on international container flows, international open portion shipping and while we are favorable year-over-year, we are just kind of slightly favorable and we had anticipated a bit more volume then we see it come through in the first quarter. In the premium segment, UPS and LTL we are off on volumes there. Again, I referred to that briefly, that is driven by the economy and retail sales as much as anything else. And then in domestic, we have lost our some market share or have accident. I think the real message on the intermodal is that if you look at where we are year-over-year from the earnings perspective, we are off in volume and up in earnings and up in price and so, as we approach the intermodal business where we are certainly looking to grow that business but also grow its returning its profit as well and so, volumes have been off for us. Our operations and service design teams have been able to reduce costs, take some excess capacity out, but still maintain reliable network for our customers.

And just a ___01:22:52 of followup on the watershed that you talked about at the tail end of year presentation. What is that that is going on in the industry that is allowing, you had put a slide up like that and we encouraged about it. This is I am guessing in theory, this is not new. What is it about this and when do you think this really gets attraction into your numbers?

I think it was John W. Snow mentioned earlier, it is the whole notion of railroads working together in a more cooperative way and thinking about that, there are two things driving it. There is the convergence I think among most railroads around the service driven business model, that is superior service, builds a platform to grow your business, and superior service that puts the platform in place to fundamentally reduce cost and improve productivity. That platform serves as the basis for discussion with the Western Railroads. To talk about these markets, and really I think about how we could enter into the alliances, into the ventures, into the relationships, let us say there is a market here. And if you look at for example, CSX, we have a large market with 350 miles in length of haul, our whole eastern corridor, east west, and shorter north south flows. So, we know the markets there. We know we can serve it and the product in place. So, I think it is the orientation of the railroads that John W. Snow describe. Traction, as I mentioned, we have good action plans in place on the operations, on the service design, joint sales and marketing. We will have traction this year as we come in through the 34 quarters.

I think it is also the fact related to that, Gary that we have now gotten most of the merger integration work behind us and we are able to focus on what is next evolution and how we serve customers better and this watershed opportunity is clearly one up. We are leaving literaly William J. Flynnions of dollars of revenues to the trucking industry and not even raising up in the past, have not even raised a competitive hand. As we sit down and build these relationships with other railroads and they build them with us, it has been one of the major topics of our conversation how do we go after the watershed. We could not have done that two years ago, because we were focussed on all of our effects and energies on trying to get the integration done. We were kind of waiting through all those problems. So, I think it is partly the maturation of the industry. It is probably the fact that there are now two strong western railroads and two strong eastern railroads and we are focusing on what is next, what further opportunities are to exploit and the watershed is longest, it is clearly there to be exploited. Michael J. Ward, do you have ...

Yeah, I just want to add a comment, Gary, on the intermodal. I think part of it we have been doing strategically here. As William J. Flynn noted, the revenue was down 18 million but we dragged 21 million across that and what we are really trying to do is to make sure we got the service right, so when the economy rebounds, we participate in it. Secondly, get the excess cost out. But thirdly, just to make sure we get the price right. We are not out there to buy market share. We are here to make money. So, we are not just out there chasing railroad market share. We want to grow the overall pipe. We are not out there following the price reduction level just for market share. Any other questions? We think we had many on that side of the house. Well in that case, we thank you all very much for joining us and we will be available to have any discussion that you would like with any of us. Thank you.